‘We’ve heard all week here about sustainability but I have not heard a mention of the monetary system. Similarly the people that run the monetary system do not often talk and think about sustainability,’ author of The Future of Money Bernard Lietaer stated in the closing session of the TIGE (Trust and Integrity in the Global Economy) conference in Caux, Switzerland, on 9 July 2014.
The Belgian economics professors, who also co-authored the Club of Rome report, Money and Sustainability: the missing link, posed a question to the engaged audience: ‘Who creates our money—the government, central banks or someone else? It’s the last one – someone else. Money is created out of nothing, through bank debt and it’s created with interest,’ he said. He posed another question: ‘How many of you have used a complementary (non-conventional) currency?’ Some in the audience answered airlines miles, supermarket coupons and others. ‘You see, most of us have used alternative currencies without even knowing it.’
He stressed that our conventional money system is the systematic cause for five ‘unsustainabilities’. The first is that it is systematically unstable in itself. Lietaer highlighted the financial crises that have occurred in more than 10 countries this year alone. ‘A monoculture is never stable; it is an accident waiting to happen.’ He warned his audience to make sure they are aware that all countries, using the same monetary system, are in danger. The solution he proposed was ‘minimum monetary diversity to attain financial stability’.
The second ‘unsustainability’ is that the creation of money amplifies business cycles. ‘Banks create money for themselves (for their own profit), after they’ve created the economy booms; and after a boom naturally comes a bust.’
The third, he explained, is that the current monetary system makes economic growth compulsory. Economic growth should not be the most imperative aspect of a financial system, he argued.
The fourth of Lietaer’s ‘unsustainabilities’ is that the current monetary system concentrates wealth. ‘Interest is, by definition, a process that extracts money from people and gives the interest to people that don’t need it,’ which brought laughter from the crowd. Lietaer stated that one third of the economy is made from interest.
Finally the last ‘unsustainability’ was that conventional money generates ‘short-termism’. This was like an ostrich with its head in the sand. ‘Because of this and our current societal ways, the only thing left on our planet in 1000 years will be nuclear waste.’
It was not all doom and gloom. Lietaer proposed a solution to these five ‘unsustainabilities’: a global currency called Terra that is ‘for everybody, owned by nobody’. He claimed with this type of currency there would be four times less volatility than the US$, it would be fully backed (and so robust) and inflation resistant. ‘This is a win-win solution and it has benefits for everybody.’
Bernard concluded that we need to move from a monoculture to a monetary ecosystem which is a necessary condition for a sustainable planet. ‘We need a values shift, to move away from the monopoly of centralising currencies with interest.’ Lietaer did not claim that this proposal was the ‘magic bullet’. ‘My claim is that if we do not change the current monetary system we will not improve our situation’. Lietaer knows what he is talking about. He is an international expert in the design and implementation of currency systems, including the Euro.
Business seen as a force for good – rediscovering its human purposes
British business author Mark Goyder sees stewardship as key to long-term sustainability
Responding to Lietaer’s talk, Mark Goyder, founding director of Tomorrow’s Company think-tank in London, said that there are many parts of the short termism and sustainable challenges that needed to be faced. But most people can’t wait until 2040 for changes. There are things that we have to seek to do now.
Twenty four years ago, Goyder said, he had asked a group of businesses, ‘What do you think is the role of businesses in a changing world?’ He discovered that they were longing for the chance, in a trusting environment, to share their anxieties. From that, Goyder decided to run a business-led enquiry of this question. ‘We ask the question, you collectively answer it and we will facilitate analysing the answers.’ The result was the first report of the agenda-setting think-tank Tomorrow’s Company in 1995, which among other things lay a conceptual foundation called an ’inclusive approach to business success’. This became the foundation for a new Company’s Act in the UK which has changed the way in which directors’ duties are framed.
Goyder, who is the author of Living Tomorrow’s Company, shared two visions with the audience: the first was an inclusive approach to the leadership of business and the second was about the role of owners, shareholders and investors. He summarised this in the word ’stewardship’. ‘If you bring these two together, I would argue that you have an agenda that’s within our reach and in which we as businesses, investors, policy makers, governments and voters can all be working towards.’
Goyder shared what the best of business could be like from his experience of 15 years in manufacturing. He talked about the focus of the original Tomorrow’s Company report which was to have a clear purpose, values, of what businesses stand for and relationships as a start of success.
Referring to Tomorrow’s Company’s vision of stewardship, he said, ‘We have been working with institutional investors and challenging government and regulators. We have now achieved what is called a “stewardship code” which is officially recognised.’ Institutional investors sign up to this code to say, ’We will be good stewards’. Goyder admitted that it is weak at the moment but it is a beginning. Tomorrow’s Company’s definition of stewardship of the company, or any asset, is, ‘that you inherit something and you feel an obligation to pass it on in better condition than you inherited it.’ It is that principle of stewardship, he explained, which we witness in many of the best businesses today.
Such stewardship was illustrated by the Japanese experience, he said. There are 20,000 Japanese companies which have lived more than 100 years. There are 600 companies which have lived more than 300 years, 30 companies which have lived more than 500 years and five companies which have lived more than 1000 years. What did they have in common? ‘Leadership driven by clear values, vision, mission, strong sense of legacy, vision of the long term, emphasis on the value of people, commitment to society, custom orientation, innovation and continuous improvement,’ Goyder said.
He concluded with an analogy of harvesting: ‘So there you are sowing, growing, reaping, storing—a view of the economy in which we’re in a relationship with what we’re making. It’s much more difficult to achieve in a global economy without that sense of connectedness; without it we will continually drive business and society further apart. Goyder passionately believes in connectedness for sustainability. It is for these reasons he states ‘that we need to work on the agenda of the inclusive company and the stewardship-minded investor.’
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